Minnesota Tuition Hikes Surpass U.S. Average Since 2000

State support for higher education in Minnesota has declined over the course of the 21st century and—as a result—tuition has skyrocketed, as demonstrated in part one and part two of this series. While these trends are not unique to Minnesota, the decline of state support and the growth in tuition in the Gopher State has been steeper than in the rest of the nation.

As with the first two articles in this series, information used here is derived from the State Higher Education Finance (SHEF): FY 2015 report from the State Higher Education Executive Officers Association (SHEEO) and an accompanying spreadsheet which provides data for all fifty states for FY 2000 to 2015. As defined by SHEEO, “educational revenue” refers to the operational funds available to higher education and consists of two components: state educational appropriations* and tuition.† To facilitate interstate comparisons, these amounts will be adjusted for differences in the cost of living and enrollment mix between states.‡ Amounts will also be adjusted for inflation using SHEEO’s Higher Education Cost Adjustment (HECA); amounts presented in this article will be expressed in constant FY 2015 dollars, unless otherwise noted. Finally, all amounts will be examined on a per student basis based on full-time equivalent (FTE) enrollment data from SHEEO.

Public educational appropriations per FTE in Minnesota were significantly above the national average at the beginning of the century. However, as noted in the first part of this series, Minnesota higher educational appropriations declined by 40.8 percent, compared to a 21.5 percent decline nationally. As a result, educational appropriations per FTE in Minnesota went from significantly above the national average in FY 2000 to significantly below in FY 2015.

State educational appropriations per FTE, both in Minnesota and nationally, have increased since FY 2013. A slightly larger increase in appropriations per FTE in Minnesota relative to the national average over this two-year period resulted in a slight narrowing of the appropriation funding gap between Minnesota and the rest of the nation.

The trend in tuition per FTE in Minnesota and nationally is the inverted image of the public appropriation trend. Minnesota tuition per FTE was slightly below the national average in FY 2000. However, as noted in the second part of this series, Minnesota tuition per FTE more than doubled from FY 2000 to 2015 (and more than tripled without adjusting for inflation). With a much lower rate of tuition growth nationally, Minnesota tuition per FTE was substantially above the national average by FY 2015.

The tuition gap between Minnesota and the rest of the nation peaked in FY 2012. As a result of a decline in Minnesota’s inflation-adjusted tuition since FY 2012 and continued growth nationally, the tuition gap between Minnesota and the rest of the nation narrowed over the last three years.

However, state higher educational appropriation increases and tuition reductions in Minnesota in recent years were not sufficient to reverse the distressing longer term trends vis-à-vis the national average that developed earlier in the century. While Minnesota total educational revenues per FTE were modestly above the national average in both FY 2000 and FY 2015, public appropriations per FTE in Minnesota went from 8.5 percent above the national average in FY 2000 to 18.2 percent below in FY 2015. The difference was made up through skyrocketing tuition borne by Minnesota students and their families. Minnesota tuition—which was 1.1 percent below the national average in FY 2000—grew to 30.3 percent above the national average in FY 2015.

Not surprisingly, public higher educational appropriations as a percent of total educational revenue fell much more abruptly in Minnesota than in the rest of the nation since the turn of the century. From FY 2000 to 2015, U.S. public appropriations as a percent of total educational revenue fell from 70.7 percent to 54.0 percent—a 16.7 percent decline. Meanwhile, in Minnesota it fell from 72.6 percent to 42.4 percent—a 30.2 percent drop. As a result, the corresponding tuition increases were much greater in Minnesota than in the rest of the nation. From FY 2000 to 2015, U.S. tuition as a percent of total educational revenue increased from 29.3 percent to 46.0 percent, while in Minnesota it grew from 27.4 percent to 57.6 percent.

The reduction in public support for higher education in Minnesota—both in absolute terms and relative to other states—has had serious implications for Minnesota. First, the resulting tuition increases have resulted in staggering levels of student loan debt for many state residents. Earlier this year, North Star held a series of forums around the state to examine the problem of student loan debt. A summary of two of these events published by the Saint Peter Herald revealed that:

Minnesota graduates carry an average student loan debt load of over $31,000—the fifth highest in the nation… And almost 1 million Minnesotans combined have over $20 billion in student loan debt… That burden translates to monthly payments as high as $500 to $750 a month, students reported, nearly as large as a potential mortgage payment… Students offered individual debt loads exceeding $70,000 and $80,000. For students continuing on to law school or medical school, those numbers soared even higher.

Such high levels of student loan debt stifle the ability of graduates to buy a home or make other long-term purchases and start a family. This in turn has a detrimental impact on Minnesota’s economy.

Second, today’s high tuition levels make it more difficult for Minnesotans to get a post-secondary education in the first place—and thus could be contributing to the shortage of skilled labor that was described in a recent MinnPost article. Conservative groups have been quick to complain about Minnesota’s labor shortages, but have been slow to recognize the potential role that cuts in state higher education funding might have played in causing these shortages.

Data from the SHEF report summarized in this and the two proceeding articles provide clear proof of the erosion of state support for higher education and the resulting escalation of tuition. These pernicious trends have been even more pronounced in Minnesota than in the rest of the nation. Efforts to reverse these trends need to continue if we are going to give the current generation of students the same opportunity as preceding generations to achieve a post-secondary degree and to enjoy a prosperous future free a crippling levels of student loan debt.

*State educational appropriations includes public support for public higher education operating expenses, excluding spending for research, agricultural extensions, and medical education, as well as support for independent institutions or students attending them. According to SHEEO, “excluding these funding components helps to improve the comparability of state-level data on a per-student basis.”

†Tuition refers to the gross amount of tuition and fees, minus financial aid, tuition waivers, and discounts and excluding medical student tuition and fees and the portion of fee revenue used to pay for non-operational purposes, such as capital expenses and debt service. This, according to SHEEO, “is a measure of the resources available from tuition and fees to support instruction and related operations at public higher education institutions” and “reflects the share of [operational] instructional support received from students and their families…”

‡The cost of living and enrollment mix adjustments are both based upon indexes developed by SHEEO and described in an appendix to the SHEF report. These adjustments are described below.

The Cost of Living Adjustment (COLA) is based on an academic study of cost of living differences across states and “offers a way to get a rough estimate of these differences for adjusting interstate unit cost data.” Based on the SHEEO COLA, Minnesota’s cost of living is 5.1 percent greater than the national average, which means that each nominal dollar of higher educational spending will purchase fewer goods and services than the national average. The effect of the COLA will be to reduce each dollar of Minnesota educational appropriation and tuition revenue by a little more than five percent relative to the national average, in order to reflect the lower purchasing power of the dollar in Minnesota.

The Enrollment Mix Index (EMI) adjusts for differences in enrollment mix among categories of institutions. Because it costs more to educate students in some institutions relative to others (e.g., educational costs per student in research universities tend to be greater than in community colleges), an adjustment for differences in enrollment mix among states facilitates interstate comparisons. Minnesota’s EMI is only 0.2 percent above the national average, reflecting an enrollment mix that slightly favors higher cost per unit institutions. Minnesota’s EMI is so close to the national average that it has little impact on Minnesota appropriation and tuition levels relative to other states.

Because of the COLA and EMI adjustments, the Minnesota appropriation and tuition levels per FTE presented in this article will differ somewhat from amounts presented in the first two parts of this series. (The first two articles did not involve interstate comparisons and thus COLA and EMI adjustments were unnecessary.) However, the percentage change in these amounts over time will be unaffected.

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